Court Cuts Through Franchisor’s Verbiage To Allow Franchises Fraud Claims

Court Cuts Through Franchisor’s Verbiage To Allow Franchises Fraud Claims

Minneapolis – July, 2007 — A federal court in Minnesota used strong language to strike down a franchisor’s attempts to make franchisees sign away their claims for fraud and violation of the Minnesota Franchise Act.   The franchisees, represented by Scott Korzenowski and Michael Dady, claimed that the franchisor had defrauded them by falsely representing how much money they would make if they purchased the franchisor’s exercise salon franchises.  The franchisor argued that the franchise agreements contained written provisions in which the franchisees had agreed that the franchisor had said nothing about the potential earnings of the franchise.

Observing that “Minnesota courts have repeatedly observed that the Minnesota Franchise Act is a remedial statute designed to favor franchisees over franchisors” the court rejected the franchisor’s arguments and held that the contract provisions were of no effect, thereby paving the way for the franchisees’ fraud claims.  Deborah Randall et al. v. Lady of America Franchise Corporation.